SC asks NLCT, NCLAT to adhere to timelines under IBC

SC asked the tribunals to clear pending resolution plans forthwith as delays can have grave economic implications

The Supreme Court on Monday asked the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) to strictly adhere to the timelines (330 days outer limit) stipulated under the Insolvency and Bankruptcy Code. It also asked the tribunals to clear pending resolution plans forthwith as delays can have grave economic implications and will impact the viability of the insolvency law.

The top court maintained that a successful resolution applicant cannot withdraw or modify its resolution plan after its submission to the NCLT as permitting such open-ended process would have a deleterious impact on the corporate debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time, thus “frustrates the core aim of the IBC.”

A bench of Justices D Y Chandrachud and M R Shah said that “inordinate delays cause commercial uncertainty, degradation in the value of the corporate debtor and makes the insolvency process inefficient and expensive."

"We urge the NCLT and NCLAT to be sensitive to the effect of such delays on the insolvency resolution process and be cognizant that adjournments hamper the efficacy of the judicial process. The NCLT and the NCLAT should endeavor, on a best effort basis, to strictly adhere to the timelines stipulated under the IBC and clear pending resolution plans forthwith," the bench added.

It also noted that “judicial delay was one of the major reasons for the failure of the insolvency regime that was in effect prior to the IBC."

"We cannot let the present insolvency regime meet the same fate,” the bench added.

The top court passed these directions in its 190-page judgement on a batch of appeals led by Ebix Singapore Pvt Ltd seeking setting aside of the NCLAT order that refused to allow Ebix to withdraw its takeover bid for Educomp Solutions Ltd, which owed lenders nearly Rs 3,000 crore.

It upheld the NCLAT judgment which had set aside the NCLT’s order that had allowed Ebix to withdraw its takeover bid of Educomp which was admitted into insolvency proceedings in 2017.

The bench said that the existing insolvency framework in India provided no scope for effecting further modifications or withdrawals of Committee of Creditors-approved resolution plans once submitted to the NCLT.

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